State Services Commission Annual Report for the year ended 30 June 2013

Resource information

Related resources

The 'Foreword of the State Services Commissioner' and the section 'Reporting on Operating Intentions' are published below. The FULL REPORT published as a PDF version is attached on the right under Related resources.

Foreword of the State Services Commissioner

A clear mandate for change

This year has seen significant changes that will have a profound impact on New Zealand’s State services for many years to come. We are in the midst of a significant transformation of New Zealand’s State services. Much work has been done and a lot of progress has been made, however our job is far from complete.

Ministers and the New Zealand public have high expectations of us: we need to deliver excellent services in a fair, transparent and effective way; we must address the challenging issues that have not been solved for many years; and we must do so within current funding levels. Delivering on these expectations requires us to not just change but to transform how we operate. We have the support of Ministers to make the changes that are necessary. Moreover, there was significant cross-party support for the recent changes to legislation. We are unlikely to get a clearer mandate for change and improvement than we have now and as a system we must grasp this opportunity with both hands.

The past year has seen some challenging issues for the State services. These include problems with the implementation of the Novopay payroll system, unauthorised release of Cabinet documents; and breaches of information security and privacy. These have rightly been issues of concern for New Zealanders and have at times been the subject of significant public attention. While it would clearly be preferable for issues like this not to happen, the State services have responded appropriately in each case and improved systems to ensure processes are more robust.

New Zealand’s system of public management with its clear lines of accountability and specification of outputs has worked well and put us at the leading edge worldwide. It has become increasingly clear that we need to do more and we need to take another step forward. We need to adopt a system-wide approach with collaborative problem solving by working across the State services. The challenges we now face are complex and cannot be solved by one agency working on its own.

To achieve a system-wide transformation we need a broad programme of change across the whole State services. It’s a three-pronged approach: results, leadership and stewardship. The diagnosis and debate are now over – we are into the hard work of implementation and change. We need to focus on the issues that really matter to New Zealanders by channelling money, people and information where they are needed to tackle the causes of problems – not just the symptoms.

The drive to provide better public services, and deliver on the Government’s 10 result areas, is helping change how the State services work. Agencies are moving away from operating in silos producing agreed outputs in their clearly defined ‘patch’ to working closely together with other agencies, focusing their efforts on achieving collective results. We recognise how challenging this is, and that we have to work differently to achieve real gains – particularly in partnering with community and private sector agencies. Agencies have made a good start towards achieving targets across the Government’s 10 result areas. The first year’s progress shows real gains are being made and confirm the Public Service is finding new ways of delivering better services.

But we need even more action and concerted effort from everyone involved to continue driving this forward. To help this innovation continue and expand, a $20 million annual seed fund has been created to enable business case development and design work for better public services initiatives.

Secondly, we are developing leaders for the State services system, not just for individual agencies. We now have empowering legislation to take a system wide approach to developing leaders who can ascend to and succeed in system-critical and future chief executive roles. This is vital to lifting the performance of the State sector over the long term.

We are developing a pipeline of leadership talent and ensuring we have clear succession plans for roles that are critical to delivery across the system. Changes to the legislation make it easier to move chief executives between agencies so we have the right people in the right place. Those changes also empower the Commissioner to take a more active role in identifying system critical roles and who is appointed to them. Cross-system leadership remains a focus with functional leaders appointed in the areas of property, procurement and IT. Functional leaders are now well into their work programme and are delivering significant cost savings and improvements in the effectiveness and delivery of these services.

We are also placing much more emphasis on our stewardship role for the State services over the long term. This means building capability and resilience into our State services for the benefit of both current and future New Zealanders. Chief executives now have a specific legal obligation to take the interests of the wider Public Service system into account. In addition we are changing chief executives’ performance expectations and targets so they have a clear requirement to ensure their agency is well run and well positioned for the future.

These changes are creating a re-focused and re-tooled State services that operates as a single system, designed and delivered around the needs of New Zealanders. This is a very exciting time and I am proud to be able to lead the system as Head of State Services. We have achieved a lot in the past year and we are looking forward to the year ahead to carry these achievements even further.

Transforming the State Services Commission (SSC)

This year we marked a century of our State services. It was a great opportunity to reflect on how far we’ve come and what’s changed, both for New Zealand and our State services, over the course of 100 years and 17 Commissioners. Our centenary year also marks the largest transformation of our State services in a generation with the SSC leading the charge.

Changes to how we operate, both internally and in our engagement with the wider system, are already having an impact. We will continue to drive new change for the Commission and for the State services, in partnership with chief executives and their agencies.

A major focus for the Commission this year has been working together as part of the Corporate Centre; the three ‘central agencies’ (SSC, Department of the Prime Minister and Cabinet (DPMC) and the Treasury) to collectively lead the State sector. One of the Corporate Centre’s major achievements was the successful establishment of the Performance Hub. This is a joint Corporate Centre team tasked with building a ‘big picture’ system-wide view of how the State sector is performing as well as designing and supporting changes to the State sector that will lift system wide performance.

An important tool for improving the performance of the State services is the Performance Improvement Framework (PIF). PIF reviews assess a government department or Crown entity’s capability and how well placed it is to deal with the issues it is likely to face in the medium-term future. SSC has also gone through its first PIF review and ours was the 29th review to be published. Our PIF has come at a very useful time and is something we are taking very seriously.

The past year has been challenging as well as rewarding and real progress has been made on the transformation of New Zealand’s State services. The analysing and preparing are now complete and the Commission is working hard to implement and ‘do’; we have a mandate from Government and new tools to work within updated legislation. The year ahead is going to be busy but we are approaching it with energy and a growing confidence from the results we are already seeing.

Reporting on Operating Intentions

This reflects that SSC is continuing to improve our services to ensure we can lead the State Services.

SSC works towards a single outcome: A higher performing State sector that New Zealanders trust, delivering outstanding results and value for money.

This outcome is shared by the central agencies. SSC’s contribution to achieving that outcome is outlined under four pillars:

Leading the System

Delivering Performance Excellence

Building System Capability, and

Strengthening Trust and Integrity.

The reporting against operating intentions section of the Annual Report is organised under those four pillars. It also reflects a few minor changes outlined in the SOI 2013 – 17.

The performance story outlined under each pillar reflects the relationship between the performance of the State services and the performance of SSC. Under each pillar we outline our observations of performance of the State services as it relates to SSC interventions, and describe what we have delivered to improve performance of the State services.

SSC organises our outputs differently under our three output classes:

State services performance management

Public management system

State services policy advice

This relationship between our pillars and our output classes is demonstrated through our outputs which map to both the pillars and the output classes. This is not a linear relationship as the output classes contribute to each of the pillars. This recognises that to achieve our desired impact on the system as outlined by our pillars, SSC must both: lead, develop and design the system; and manage and evaluate the performance of the system as outlined by our two main output classes.

Performance at a Glance

SSC’s impact on our outcome ‘A higher performing State sector that New Zealanders trust, delivering outstanding results and value for money’ is measured through a number of impact performance measures. Performance expectations were achieved. There is more to do to get the State sector performing at the level required to meet expectations, but it is worthwhile reflecting on the achievements for the year.

Leading the system

First progress report on Government better public services 10 results was published. The report showed progress against some challenging targets

Overall service quality of Public Services improved to a score of 73 in 2013 from 72 in 2012 using the Kiwis Count Survey.

Delivering Performance Excellence

Amid rising expectations there was a slight increase in the proportion of agencies that received ‘well placed’ or ‘strong’ PIF results during the last year.

Building System Capability

Improvements were made in ‘leadership and capability development’ and ‘management of people performance’ elements of the PIF.

Strengthening Trust and Integrity

New Zealand was ranked first equal in Public Service probity as measured by the Transparency International Corruption Perceptions Index

76% of New Zealanders indicated in the Kiwis Count Survey that they have overall trust in the public services they receive. This is up from 74% in 2012.

Leading the System

We have a strong tradition of ground-breaking reform in New Zealand and the better public services (BPS) reforms continue our push to be at the leading edge of innovation and excellence in State services. New legislation has been passed which will support this once-in-a-generation transformation of the State Services by:

helping create a State sector that operates as a system, rather than as a collection of individual agencies, and

providing permissive tools that will assist change – giving options for managing capability and delivering services in a different way.

While the legislation is pivotal to enabling transformation, change has already been happening. Over the past year the States services have committed to operating differently in three fundamental ways:

working collaboratively to deliver results – concentrating on the issues that really matter for New Zealanders and focusing money, people and information across the State sector where they are needed most

system-focused leadership – developing leaders for the system, not just for individual agencies – and focusing on stronger management and leadership development, and

stewardship – building more capability and resilience into our State services for the benefit of current and future New Zealanders.

DELIVERING RESULTS

The set of 10 BPS result areas for New Zealand are a world-leading innovation. Owned and driven by Ministers and chief executives, they are driving the shift from achievement by standalone agencies to a system focused on achievement.

To deliver on these goals, the State sector is having to work quite differently including harnessing community and private sector capabilities (e.g., contracting for results and greater contestability to drive innovation).

System-focused leadership

A strong system needs strong leaders. Our leaders of the future will not just lead their own agencies but also the State sector. Future chief executives and senior leaders will need to demonstrate experience of working in a range of different agencies and contexts before being considered for top roles.

Much has already been achieved by the State services to improve how agencies work in collaboration, especially in the area of functional leadership.

Procurement functional leadership is achieving good participation in whole-of-government contracts by departments and Crown entities as well as developing procurement capability in agencies (including by extending the application of procurement rules through a whole-of-government direction).

Property functional leadership is realising savings, driving a reduction in the overall government property footprint, and facilitating co-location (including in government accommodation in Christchurch) and standardised efficient workspaces.

The Government Chief Information Officer (GCIO) is implementing the all-of-government ICT strategy and action plan and building capability to enable a robust assurance function.

While these improvements in system-focused leadership are important, there are even greater opportunities to improve leadership. One thing that will incentivise a system focus is the new emphasis placed on stewardship.

Stewardship

We need to take a longer-term and more sustainable approach to running State services. The new legislation introduces a responsibility for chief executives to administer their departments on behalf of others – current and future Ministers, and all New Zealanders. This means a chief executive should leave a department in better shape than when they took office. This has always been our expectation; however, now chief executives must give explicit consideration to balancing the needs of today, with the needs of the future.

Changes to State sector legislation

In July 2013 the omnibus State Sector and Public Finance Reform Bill was divided into three amendment Bills that were given royal assent and passed into legislation. The Bills as an omnibus Bill made amendments to the State Sector Act 1988, the Public Finance Act 1989 and the Crown Entities Act 2004.

These legislative changes support the changes needed to improve the performance of the State services. By passing this legislation Parliament has provided a strong mandate and the tools required to support those changes.

The amendments provide a wider range of public sector management tools that will enable the State services to adapt and change quickly to meet different needs and demands, both now and well into the future.

Improved performance of the State services has been built around three key shifts: one towards a results focus; one towards system-focused leadership and a third towards stewardship. The legislation supports each of these in the following ways.

Results focus

The legislation will encourage greater collaboration across agencies. Changes to the Public Finance Act 1989 and Crown Entities Act 2004 in particular will support this through:

provision of joint funding tools such as multi-category appropriations

strengthening the alignment of Crown entities by amending the collective duties of Crown entity boards, to ensure that a Crown entity performs its functions ‘in collaboration with other public entities where practicable’, and

supporting functional leadership by expanding scope for the use of whole-of-government directions

System leadership

The legislation adds to the role of the State Services Commissioner so that it now includes explicit responsibility for leadership and oversight of the performance of the State services as a whole. The legislation also enables the Commissioner to deploy talent across the system. This means being able to move chief executives into vacant chief executive positions in the Public Service, and to designate positions in the Public Service as key positions including approving appointments to those roles (which will normally be at senior tier two and some of the large tier three roles).

Stewardship

Amendments to the State Sector Act 1988 have extended the responsibilities of chief executives, particularly to consider matters relating to the collective interests of government, and stewardship of the Crown’s medium- to long-term interests. This is to improve longer-term thinking and active planning and management of the dimensions of that concept.

MEASURING SUCCESS

Ten key results for New Zealanders

In July 2013 the Government issued the first progress report on the 10 BPS result areas and the measurable targets sitting under them. Deputy Prime Minister Bill English and Minister of State Services Jonathan Coleman commented that good progress was being made across the results to address some of New Zealand’s most challenging issues.

There are 14 measurable targets in total, as some of the 10 results areas have more than one target. A Minister is leading each of the 10 result areas and they are expecting Public Service chief executives to demonstrate real progress against them.

Ministers have also set up a seed fund over four years to support government agencies as they work towards meeting their targets.

The targets are challenging however some of the progress made to date includes:

The number of people continuously receiving a working-age benefit for more than 12 months has fallen by almost 3,000 since March last year to 75,300. The target is 55,000 by 2017.

As at March this year 89% of eight-month olds had been immunised – up from less than 85% a year ago. The target is 95% by December 2014, and for this to be maintained through to June 2017.

The proportion of 18-year olds with a National Certificate of Educational Achievement (NCEA) Level 2 or equivalent qualification increased to 77.2% in 2012, up from 74.3% the previous year. The target is 85% in 2017.

Delivering better services to the public

The Kiwis Count programme helps SSC to lead the State services to deliver better public services to New Zealanders. New Zealanders tell us that in the past 12 months public services have improved again. The overall service quality score for the June quarter 2013 is 73, a point higher than the June quarter 2012. New Zealanders have reported a steady improvement in public services over the past six years. Overall service quality was 68 in 2007 and has risen steadily to 69 in 2009, 72 in the June quarter 2012 and 73 in June 2013.

When we asked New Zealanders what services were most important to them they told us unequivocally these are health, education and emergency services.2 Since the baseline measure in 2007, considerable improvement has been achieved across these services.

emergency services improved 8 points from 73 in 2007 to 81 in 2013

using an 0800 number for health information improved 8 points from 67 in 2007 to 75 in 2013

staying in a public hospital improved 6 points from 68 in 2007 to 74 in 2013

outpatient/A&E services from a public hospital improved 5 points from 69 in 2007 to 74 in 2013

tertiary education improved 4 points from 70 in 2007 to 74 in 2013

the Police (for a non-emergency situation) improved 4 points from 62 in 2007 to 66 in 2013

This shows the State services are delivering on the services that matter to New Zealanders.

DELIVERING RESULTS

Improve State sector design

The BPS reforms are about enabling exemplary State sector performance through more flexible public management tools and a greater focus on capability and leadership. SSC’s role is to lead and support this reform programme.

Enactment of the legislative changes, with active support for passage of the Bill over the past year, is the culmination of several years of work for SSC. The legislation provides new tools to enable SSC to drive performance improvements to the State services to create a State service of the future that can adapt and change quickly to different needs and demands of government.

The focus is now on optimising the operation of the State services, using the new legislative tools to support the reform programme including, as already outlined, delivering results and system-focused leadership. Work to implement stewardship is outlined under ‘Delivering Performance Excellence’ and in particular under ‘Lift chief executive performance’. SSC also has an ongoing role in monitoring the cap on core government administration.

Delivering results

A focus on achieving results means being clear on what you are trying to achieve – the result comes first and defines how best to bring relevant capabilities together in the best way to achieve those results. Supporting this, we expect to see take up of new joint-funding tools (e.g., Multi-category Appropriations enabled by Public Finance Act 1989 changes) and stronger alignment of Crown entities with whole-of-government initiatives through the changes to the Crown Entities Act 2004.

To be more effective we also need to improve ‘bottom-line’ performance in a way that frees up chief executives and agencies to focus on results. This is about harnessing of scale and capturing efficiencies in transactional services – through functional leadership (e.g., property, procurement and GCIO) and driving efficiencies in back office functions (e.g., in HR and finance).

System-focused leadership

SSC has established significant new system leadership roles. The State Services Commissioner is now the Head of the State services and is responsible for the performance of the State services as a whole. This leadership role is supported by the Corporate Centre.

The strengthened mandates of functional leaders are also a key system leadership change. The Corporate Centre is supporting them to implement their mandates including by co-producing an operating model built on shared best practice (in benefits realisation and reporting, funding models, clarity of decision rights and effective engagement with agencies).

The new legislation gives us tools to change the incentives for senior leaders. Public Service chief executives now have clear obligations to consider the collective interests of government. These obligations will be reflected in chief executive performance expectations. Legislative changes have also enabled the designation of key positions: roles deemed important enough that any appointment to them will now require the additional approval of the Commissioner alongside the agency chief executive.

Corporate Centre

SSC with our central agency partners is responsible for leading and supporting the transformation of the State services to deliver better public services. To lead we must be an exemplar of the kind of culture and operating style the BPS programme is seeking to achieve. This means central agencies and functional leaders must work more collaboratively as the Corporate Centre to drive changes to the State Services.

To enable the Corporate Centre to play a stronger and more cohesive leadership role we established a joint venture called the State Sector Performance Hub (the Performance Hub) in February 2013. The Performance Hub will provide a view on the performance of the system and design and support changes to improve performance.

Collectively we supported the passage of the State Sector and Public Finance Reform Bill, which was passed in July 2013.

This year we worked in collaboration with our Corporate Centre colleagues to integrate the previously separately required Four-year Budget Plans and Workforce Strategies into a single Four-year Plan document. These were a key input into the Budget 2013 process and are designed to provide Ministers and central agencies with a clear and integrated view of an agency’s/sector’s direction on strategy, financial performance and workforce, and to show how agencies will achieve their priorities within baseline.

There is still work to do to land an operating model for the Corporate Centre – to get clear about how we work together most effectively to enable the State sector to perform at its best and deliver better public services.

Capping the core government administration

The cap on the size of core government administration is a key priority for SSC, and is designed to shift resources from the back office into front line services. The cap was reset in March 2012 at the lower level of 36,475 full-time equivalent (FTE) positions (FTE staff and vacancies). This was the number of positions as at 30 June 2011.

Ensure the organisations and structures of the system are fit for purpose

SSC provides high-quality machinery of government advice to Ministers. This work includes reviewing the allocation of functions to and between departments and other agencies, and the desirability or need for new agencies, amalgamation or abolition of existing departments or agencies.

SSC coordinated the Government’s response to the Royal Commission on the Pike River Coal Mine Tragedy. As part of this work, SSC advised Ministers on the appropriate governance and accountability arrangements for a new workplace health and safety regulator, to be established as WorkSafe New Zealand. SSC supported the Ministry of Business, Innovation and Employment (MBIE) in its establishment planning for WorkSafe New Zealand alongside the delivery of the Pike River Implementation Plan and responding to the Independent Taskforce on Workplace Health and Safety.

Our machinery of government advice has helped to implement the BPS programme. We have supported agencies in ensuring that systems are in place to drive forward achievement of the Government’s 10 priority results. We have worked to deliver the right mandates for functional leaders. Legislative amendments to the State Sector Act 1988 and Cabinet policy decisions have given us new tools, such as the Departmental Agency model and the Specific Purpose Board model, for harnessing collective governance and achieving resilient, efficient organisations.

Delivering Performance Excellence

Changes in how the State services operate have lifted performance of the system as a whole, particularly with Functional Leadership and collaboration around results. Performance excellence, however, is not just created by changes to the system; it is built off performance of sectors, agencies and chief executives.

New Zealand already has good public institutions. Building great public institutions requires ambition and confidence on the part of all players in the State services: agency officials, central agency officials and Ministers. The Getting to Great report, put together by PIF Lead Reviewers and published in October 2012, identifies good practice from 21 individual PIF reviews.

The report’s key conclusion is that while many of our public institutions are adept at managing immediate issues, transactional stakeholder relationships and the priorities of governments of the day, they tend to be less successful in building strong and enduring public institutions whose purpose and roles are clear and whose core business effectiveness and efficiency is as strong as their ability to manage issues and events.

MEASURING SUCCESS

Overall performance improvement

A PIF review is a review of an agency’s fitness-for-purpose today and for the future. It looks at the current state of an agency, then how well placed it is to deal with the issues that confront it over a four year horizon. It looks at the areas where the agency needs to do the most work to make itself fit-for-purpose. PIF uses a five-point rating scale. Simply put, the greener a traffic light, the better positioned the agency is. The more red and orange the traffic lights, the more work needs to be done by the agency.

The ratings can be aggregated to provide a mosaic of how the system is performing. The methodology and limitations of such analysis is available on SSC website. The ratings observe and comment on which agencies do things particularly well, and what is at the heart of strong practice. They bring a sharpness of focus to the PIF reviews. They can also be used as a proxy indicator for assessing performance excellence.

As at 30 June 2013, 26 reviews have been published. The overall decline (but slight increase in the last year) in well-placed and strong ratings reflects two substantial upgrades, together with the rising standards chief executives and senior leaders hold themselves responsible for, as well as the rising confidence and expectations of lead reviewers.

DELIVERING RESULTS

Lift performance of sectors and agencies in the State Services

To drive sector and system-wide performance, SSC takes a leadership role in working with sectors and agencies to lift performance and to identify opportunities for greater sector and system impact.

SSC has changed the way it operates to ensure we add value to sectors and agencies by identifying performance improvement levers, working with sector lead chief executives to employ those levers effectively and promoting governance approaches that support achievement of sector results. An example of this includes using PIF findings and findings from the recently published Getting to Great report to understand system and sector strengths to inform areas of potential improvement.

During the year SSC provided advice on a number of issues across the system and an objective insight to both Ministers and agencies on sector and system-wide issues.

SSC is also taking a more proactive approach to managing risks across the system, with the Head of State Services responsible for performance across the system as a whole. This means a system performance failure is potentially a failure of SSC. SSC has taken a stronger risk based approach to identifying and addressing risks and is proactively working alongside sectors and agencies to manage risks and potential issues within the system.

For example, earlier this year SSC and the GCIO worked together on a review of publicly accessible computer systems. Following a number of information privacy and security breaches the State Services Commissioner tasked the GCIO with carrying out a review of information privacy and security standards in publicly accessible computer systems across the State sector. The review found that security and privacy processes were underdeveloped in many agencies and in response a substantial programme of work is being implemented to bring agencies up to best practice standard with chief executives responsible for ensuring this happens. The work programme is being led by the GCIO with support and oversight from SSC. By working collaboratively as part of the Corporate Centre, SSC and the GCIO were able to identify sector-wide issues and deliver an effective solution.

Lift chief executive performance

SSC’s role, as employer of chief executives, provides an important lever to influence the leadership and performance of agencies. SSC works with chief executives to drive and lift performance by setting clear, measurable performance expectations with a four-year excellence horizon, providing ongoing support and advice throughout the year, and holding them to account for their achievement against performance expectations.

SSC has continued to embed its redesigned performance management system (introduced in 2012), which actively supports chief executives to achieve results through real-time feedback and ongoing engagement and advice. Over the coming year we will continue to refine and enhance the model. This means setting performance expectations that will include standard core chief executive and agency responsibilities, clarify chief executives’ stewardship role, and focus chief executive performance on system-wide results.

For the 2012/13 period SSC completed performance reviews for 31 chief executives.

Assess the effectiveness of agency performance

In the past 12 months SSC has published 10 full PIF Reviews and six PIF Follow-up Reviews. A further five full PIF reviews and two PIF Follow-up Reviews were substantively completed in 2012/13 and will be published in early 2013/14.

Land Information New Zealand (LINZ) became the first agency to conduct a second full PIF review, which will be published in mid-2013, following an initial full review in 2010 and a follow-up in 2011. Lead reviewers and central agency staff have refined the approach to second (and subsequent) full PIF reviews, which must balance a focus on the challenges each agency faces in the future (the four-year excellence horizon), while also considering how the agency has improved its performance so far. An increasing proportion of upcoming PIF reviews will be conducted with agencies that have already been through the PIF process, so this represents an important evolution of PIF practice to provide ongoing performance improvement gains.

Supplementing the Getting to Great report, SSC also ran a series of Getting to Great seminars, designed to provide leaders in the public sector with ideas about what their agencies can do to become leading, world-class institutions that New Zealanders can be proud of.

In addition, over the past year three elements of the PIF model were upgraded. It was the second upgrade – the first being the addition of the Four-year Excellence Horizon in the previous financial year. The third upgrade was developed throughout the latter part of the financial year. This upgrade – which will be the most significant yet – will be promulgated in the second quarter of the next financial year.

Provide assurance on the management of major government projects

The Major Projects Assurance team provides assurance, in conjunction with the Treasury (and the GCIO for ICT projects) and regular reports to Ministers on the progress of major projects and programmes in the Public Service, focusing on those deemed to be high risk. The team also facilitates and coordinates Gateway reviews.

Annual ‘Systemic Issues’ and Gateway Lessons Learned reports are distributed based on assurance activity completed across all monitored projects.

In the last 12 months the team has carried out ongoing assurance over 48 major projects and programmes that are classified as high risk. The objectives of this assurance are to:

provide independent advice to Ministers on the risk status of projects and to identify any interventions that may be required, and

support and improve agency performance in project delivery and to reduce the chance of project failure by providing pragmatic and value-adding support and advice.

In the last 12 months the Major Projects Assurance team has also completed 24 Gateway reviews against a target of 20 reviews; the same number (24) is expected in the next financial year.

In the next year the Gateway operating model is likely to be updated to the Delivery Confidence model, which provides greater visibility at the system level on Gateway recommendations and action plans by project teams to address issues, particularly where outcomes are considered to be at risk.

Building System Capability

Leadership is the most critical factor in driving system-wide change and ensuring the effective delivery of the BPS programme. SSC is creating a system-wide approach to developing leadership. Already there have been changes to the way senior leaders build and manage capability, of themselves and within their agencies and across the system.

Chief executives are actively engaged in discussing, developing and moving senior management around the system through the career board process. This includes identifying key roles for the system and having the broader senior leadership group opt into the career board process. Senior leaders are actively engaged through Top 200 events.

Agencies are also improving how they manage and build their organisational capability. This work is supported by SSC, however, it is agencies themselves that are using these tools to manage their workforce more effectively and efficiently. Agencies are seeing value in taking a strategic view around managing their capability.

There are already agencies that provide leadership development from entry level to senior managers. There are good practice models used for core capability development such as graduate programmes. The challenge is to build on existing best practice within agencies, the current career board work and well regarded Leadership Development Centre (LDC) and Australian & New Zealand School of Government (ANZSOG) programmes, to create a system wide approach.

MEASURING SUCCESS

Improvement in people development

People development is a key indicator for building system capability. The major elements in people development are:

The percentages represent the proportion of agencies being ‘well placed’ or ‘strong’. Findings so far outline that people performance management is reasonably good for high performing staff, but not so good for lower performing staff. Staff engagement, as measured by engagement surveys, is often lower than is desirable.

People Development: Proportion of agencies as "strong" or "well placed"

As at 30 June 35% of agencies were at ‘well placed’ or ‘strong’ in the People Development overall category which is an improvement from the 29.1% measured in January this year.

There has been a small improvement in the results from last year; however, it is clear that agencies can do better at managing and developing their people. Again this is within the context of the PIF undertaking two substantial upgrades, together with the rising standards chief executives and senior leaders hold themselves responsible for, as well as the rising confidence and expectations of lead reviewers.

DELIVERING RESULTS

Identify, recruit, and develop current and future senior leaders

SSC is working with chief executives and the LDC to put in place a new, system focused approach to leadership development and deployment. Introducing a coordinated, system-wide approach to developing leadership and capability will ensure a pipeline of capable, high performing State servants who can step up to senior leadership roles and key positions.

This year, further improvements were made to the career board process to better inform the identification, development and deployment of senior leaders. At the centre of these improvements is establishing key positions across the Public Service agencies. These roles are deemed important because they have influence over key government priorities, are critical to our national emergency response operations, or provide significant development opportunities for senior leaders. This year, career boards began the process of building a succession pipeline for key positions.

Other initiatives have included the hosting of ‘Top 200’ events and the coordination of placements for the ANZSOG programme. These initiatives ensure the constant engagement of future leaders and chief executives. Overall, these events are important to building a ‘State services’ leadership cohort who can see the broader system wide implications of their decisions and efforts.

The continued development of this priority area of work will in time establish a leadership succession pipeline for key roles and chief executive positions, and better support the development and deployment of leaders.

During the 2012/13 year, eight chief executives were recruited into Public Service departments. This process incorporated a system-wide talent identification process, proactively managing the gathering and development of a capable pool of future leaders. The recruitment process has also been simplified to improve the experience for candidates.

Three current chief executives were reappointed for a further term in 2012/13. The decision that these public sector chief executives would continue in their roles for another term reflects confidence in their performance and in current management and development practices.

SSC continues to manage appointments on behalf of Ministers at their request, requiring a significant amount of trust in the quality of appointments and SSC’s recruitment practices.

During 2012/13 the following chief executives were appointed under section 35 of the State Sector Act 1988 and commenced in their roles:

During 2012/13 the following chief executives' reappointments took effect under section 36 of the State Sector Act 1988:

The following chief executives left their positions during the 2012/13 year:

Ensure agencies are developing effective workforce strategies

In 2012/13 SSC and the Treasury led the introduction of Four-year Plans across Public Service agencies. Four-year Plans have been successful in assisting agencies to integrate organisational capability and workforce strategy into their medium-term strategy and planning.

Agencies are actively building their capability around workforce and there has been positive feedback from agencies on SSC’s support. Our focus has been to support the development of collaborative networks and to enable agencies to share their expertise and learning. We also provide direct support and advice to agencies developing workforce strategies including as part of 2013 Four-year Plans.

Analysis of Four-year Plans has provided useful insights on cross-agency workforce trends and pressures to inform system interventions around future workforce capability needs across the Public Service.

Provide advice on employment conditions and employment relations

SSC has a role in ensuring bargaining outcomes are consistent with the Government’s Expectations for Pay and Employment Conditions in the State Sector. A total of 10 agencies submitted strategies for collective bargaining in 2012/13. All bargaining strategies and Terms of Settlement were approved by SSC as consistent with the Government’s expectations.

SSC uses the Labour Cost Index (LCI) published by Statistics New Zealand as an indicator of its success in meeting its target of moderating Public Service wage growth to the same or less than the private sector over time. LCI tracks the salary and wage growth of industries in New Zealand.

Salary movements in the Public Service and private sector

Unadjusted LCI growth3 in the Public Service for the year ending 30 June 2013 was 2.8%. This compares with growth in the private sector of 3.0% for the same period. This is not as marked a difference from the 2011/12 year, and is indicative that while Public Service agencies are responding appropriately to the need for restraint in salary movements the outcomes are trending closer to those in the private sector.

Strengthening Trust and Integrity

Fundamentally, New Zealander’s levels of trust in the State services remain high, and this level of trust appears to be well founded. However, the broader environment, the system, and the ways we work, are all changing. We will need to be proactive in changing the way we support the system to deliver services to New Zealanders in a way that maintains their trust.

One particular challenge in 2012/13, in terms of this changed way of working, was information security and privacy issues that arose as a result of increased use of technology and information management within agencies. These issues have prompted a high degree of attention across State sector agencies, including the formation of new ICT assurance systems for the Government. This move towards a higher use of ICT and information management will continue. We are working closely with GCIO and other agencies involved in assurance to ensure that New Zealanders’ levels of trust in the State services remain high as these changes in how services are delivered continue to roll out.

MEASURING SUCCESS

Transparency International Corruption Perceptions

The most recent Transparency International Corruption Perceptions Index was published in December 2012. The index measures perceived levels of public sector corruption in 176 countries and territories. New Zealand was ranked first as the country with the lowest perceived level of corruption, topping the table alongside Denmark and Finland. The index is compiled from different assessments and business opinion surveys carried out by independent institutions. Since 2006, New Zealand has consistently ranked first or first equal on the index.

Trust in public services

The Kiwis Count survey asks New Zealanders about their trust in public services based on both their perceptions and most recent experience.

In the 2013 survey, when asked to think about their most recent service experience, 76% of New Zealanders gave a 4 or 5 out of 5 when asked “Overall you can trust them to do what is right” (1 is ‘strongly disagree’ and 5 is ‘strongly agree’). This was up from 74% in 2012 and 70% in 2009.

While perceptions of trust in public services increased between 2009 and 2012 they levelled off in 2013. The Kiwis Count survey asks New Zealanders to rate their overall impressions of trust in the Public Service on a 5-point scale (1 is ‘Do not trust them at all’ and 5 is ‘Trust them completely’). In 2012, 42% of survey respondents gave a 4 or 5 out of 5 (up from 33% in 2009). In 2013, 41% of New Zealanders gave a 4 or 5 out of 5.

Experience and perception of trust

DELIVERING RESULTS

Provide advice on standards of integrity and conduct

SSC’s integrity and conduct work programme seeks to embed integrity as a foundation in all of SSC’s work. It also seeks to strengthen and coordinate integrity work by establishing greater links and working with State sector agencies and others on integrity and conduct issues.

SSC continued to promote the Code of Conduct for the State services and assist with its implementation and interpretation. In 2012, the code was formally applied to four new agencies that became operational. Induction sessions for newly appointed departmental chief executives have all included a component on the Code of Conduct and related integrity expectations of employees.

SSC has also implemented two rounds of the chief executive expense, gifts and hospitality disclosure initiative in 2012/13. The regime promotes transparency and accountability for public spending by requiring chief executives of Public Service departments and statutory Crown entities to publish their incurred expenses, gifts and hospitality on a six-monthly basis. All chief executives made the disclosures. Expectations have now been reset for Public Service and Crown entity chief executives, with the Commissioner signalling a move to an annual rather than six-monthly disclosure regime from 2013/14.

SSC runs an integrity ‘helpdesk’ responding to queries from State servants and members of the public about matters of integrity and conduct. In the 12 months to 30 June 2013, SSC responded to 95 individual queries. A small proportion of these related to complaints from members of the public about alleged integrity breaches in a State services agency. In these cases, SSC made preliminary enquiries into the allegations and worked with the agencies and complainants to find a resolution.

In 2013/14 a key focus is sharpening integrity information to inform all of SSC’s work and supplement other information sources, and increasing the integrity focus in all of SSC’s work-in particular SSC’s work in aiding the development of high levels of system performance.

The Integrity team is strengthening SSC’s integrity information base, with an upgraded Integrity & Conduct survey being run in late 2013. The new survey will examine perceptions of integrity and allow us to explore the links between perceptions of integrity, management capability and agency performance. The survey results will inform our ongoing work programme, which will be delivered through targeted guidance and promotion across agencies and to the public, and through specific SSC interventions and products (such as the PIF).

Providing integrity and conduct advice to public servants in the lead up to next year’s general election represents a key piece of work for the Integrity team.

Investigate issues regarding the integrity and conduct of State servants

During 2012/13, SSC had one formal investigation underway under the State Sector Act 1988, into the possible unauthorised release of information relating to the Ministry of Foreign Affairs and Trade. That investigation is ongoing.

Organisational Health and Capability

Our organisation

Over the past year SSC has focused on understanding, through the four year planning process, what kind of capability it will need for the future to deliver on its outputs and its system leadership role.

SSC continues to focus on continuous improvement, including reviews of operating models within business units. We made significant changes to our organisational structure in 2012/13, in particular within the Organisational Strategy and Performance Group. We have focused on improved clarity around requirements in areas such as planning, communications and business support, and worked to match capability and capacity accordingly. SSC reduced the cost of provision of corporate functions to 22.3% from 33% in the previous year.

SSC’s own PIF review, started in December 2012, created an opportunity for consideration of our organisational health and reflection of our fitness for purpose, now and over the next four years. The resulting action plan will include a renewed focus on organisational health and capability through SSC’s revised workforce strategy.

Our People

SSC continues to focus on improving capability, particularly across our third tier manager group, with the expectation that this group steps up over the coming year to further support the Commission’s endeavours. The development of the Management Advisory Group (MAG) has supported third tier managers to provide a view of the organisation and advice and guidance to the senior leadership team. This group will take more responsibility for the internal management of SSC and for ensuring our priorities are met over the coming year, in particular directing resources to our priorities and managing and mitigating any risks that SSC may encounter throughout the year.

Overall, to meet the needs of our organisation and to deliver on our workforce strategy we will continue to:

ensure SSC people have the skill sets and experience to deliver on their work objectives and to be persuasive influencers with Ministers and State services leaders

develop career pathways, talent management and succession planning for SSC people

make sure that SSC’s way of working is characterised by a focus on the big strategic issues facing the system and working in collaboration with others, and

reintroduce the 90-day planning process, to ensure delivery of a limited number of critical priorities.

Employee engagement

In 2012/13 SSC measured employee engagement using the TeamTalk survey, based on the Gallup Q12. Ninety-seven percent of staff responded to the survey. SSC’s results improved for every survey question and its overall survey results showed a meaningful improvement. SSC recognises that high employee engagement leads to increased individual and organisational performance and improved job satisfaction and employee loyalty. As SSC continues to refocus its workforce and prioritise deliverables against its Four-year Plan it is important to maintain a focus on improved employee engagement.

People initiatives over the coming year will include:

implementation of a Workforce Strategy that is aligned to SSC’s Four-year plan

continuous improvement of our performance management framework: this will involve implementing a five point scale for performance appraisal, following requests from managers and staff

continued group and individual coaching, and

implementation of people tools and resources that improve productivity, engagement and have a visible impact on our workforce.

SSC will continue its commitment to building staff engagement and capability, to ensure that it is well placed to take a key leadership role in addressing the challenges and opportunities facing the State services.

SSC will continue to measure and report staff engagement levels through both formal (survey) and informal means. The annual survey will continue as a key measure of engagement for SSC.

Equal employment opportunities and diversity

SSC will continue its commitment to the four groups identified in the Equal Employment Opportunities policy for the Public Service – Māori, ethnic or minority groups, women and people with disabilities – and to appointment on merit. It focuses on ensuring the varied needs of its workforce are met. As an example, a number of SSC people have flexible working hours and arrangements so they are able to balance their work and other commitments.

Our processes

SSC, the Treasury and DPMC will continue to receive services from CASS (Central Agencies Shared Services) including Finance, Information Technology, Information Management and Human Resources. In the past year CASS has delivered on a number of initiatives that will improve performance and effectiveness through:

developing better corporate services, including the capability to innovate, build job satisfaction and career development

building strong corporate services which will deliver services that exceed the sums of their parts, and

minimising risk through building greater resilience and strengthening capability.

CASS has also had a report commissioned by the Treasury on the lessons learned from the establishment of CASS. The reports main finding is that CASS has made good progress since its establishment, with some areas to further develop to provide the maturity of service it is expected to deliver.

SSC runs its own communications, strategic planning, project, assurance and business support services. CASS and SSC’s internal corporate services teams will be constantly challenged to ensure improved maturity in their service delivery and reduction in overall costs for corporate services.

Departmental Internal Control Evaluation

The Treasury no longer runs DICE. The Treasury has replaced this with the CIPFA TICK Survey. The survey is a self-evaluation of the internal controls environment. It is administered by the Treasury and draws on a financial model designed by CIPFA (the UK’s Chartered Institute of Public Finance and Accountancy). SSC met minimum requirements required by the Treasury.

Our Infrastructure

High quality infrastructure is critical to supporting our people to deliver on our work programme.

The results of the Better Administrative Support Services (BASS) process indicate that SSC continues to be within the expected requirements in relation to accommodation space and cost per head. This has been a key success in relation to the reduction of costs within SSC.

As part of CASS implementation, SSC, the Treasury and DPMC continue to progress the development of common IT infrastructure, finance, payroll and HR systems. Delivery of these integrated systems will progress across 2013/14 and beyond. Integrated systems will mean the three agencies benefit from combined support and a consequent reduction in support costs long term following a period of investment. These initiatives ensure that the benefits of CASS are realised.

Better Administrative and Support Services

SSC continues to benchmark our results through BASS and compares favourably with other similar agencies in its cohort and with the general BASS average. Areas of higher cost in 2011/12 are property and HR. SSC moved to cheaper accommodation in March 2012 and BASS results for 2012/13 will show a full year impact. In March 2012, SSC changed its delivery model for the provision of finance, HR, IT and information management functions. These are now purchased from CASS. Core functions in 2012/13 have been delivered at lower cost however there has been a higher level of IT capital investment during 2012/13 which means that SSC costs may still be higher than for its peer group and New Zealand full cohort. SSC uses benchmarks from annual BASS assessments to inform and direct further improvements in corporate services and costs. During 2012/13, SSC has ensured that costs are further reduced by implementing a continuous improvement model to ensure our corporate costs are continually in focus.

* The baseline target of 11.92%, based on 2009/10 results, is redundant as it excludes property costs and IT capital spend. The target was calculated as a percentage of budgeted organisational running costs rather than actual costs and included the State Sector Training Organisation output class funded at $6.5 million. Taking into account these facts would result in an amended target based on 2009/10 results of 25.62% and amended 2010/11 results of 24.04%. Results for 2012/13 will be developed after year-end financial results have been completed.

Feedback from our Stakeholders

In 2012-13 SSC undertook its first PIF review as an agency. This involved interviews with over 30 stakeholders, a focus group comprised of Public Service chief executives, a staff focus group and interviews with the Ministers of Finance and State Services. Given that the PIF Lead Reviewers sought feedback from SSC’s stakeholders on the agency’s fitness for purpose both now and into the future, the Commission made a decision not to undertake a separate round of stakeholder feedback in 2012/13.

SSC’s own PIF provoked a long, hard look at our strategy, governance, culture, systems and processes. We know that we have significant work to do to get some parts of our house in order – and this is reflected in our PIF results. Like many other Public Service organisations, SSC needs to change further and faster to meet rising public and ministerial expectations.

Our PIF feedback has come at a useful time for SSC. We are working to get very clear about our priorities: focusing on work that delivers the greatest impact across the system. Over the next 12 months we will continue to focus on our core business, including our work on system integrity, and have prioritised the following work:

strengthening leadership within the State services – including talent identification, leadership development and succession planning

improving the way we recruit, develop performance expectations for, remunerate and appraise the performance of chief executives

supporting the delivery of better public services results and functional leadership, and

completing our own Workforce Strategy and a fast start to priority actions coming out of it.

We will deliver on all of these priorities.

SSC will also be focused on building itself as an organisation over the next 12 months. We want the Commission to be an exemplar of the kind of culture and operating style the BPS programme is seeking to achieve. It should present as a confident and competent agency and be a place talented public servants are drawn to for critical career experience.

We will also continue to work with our Corporate Centre partners, the Treasury and DPMC, to land an operating model for the Corporate Centre – to get clear about how we work together most effectively to enable the State sector to perform at its best and deliver better public services.

Managing Risk

Risk management is integral to being able to deliver on our responsibilities. The move to more proactive management of risks within the system is a priority for SSC if we are to collectively improve performance of the State services. This emphasis has resulted in the development of a number of approaches to embedding risk within our business and improving our governance, including:

Creation of a team within SSC who have a responsibility to assess performance of the system as a whole to look for risks and opportunities to improve performance of the system.

SSC reviews risks within sector and agencies with our central agencies partners. The aim is to, as much as possible, get ahead of risks and work with agencies to resolve these before they become issues.

Improve governance of risk. A risk working group has been established to provide an integrated view of risks across all three layers outlined above, particularly from a system perspective, to ensure the Commissioner has appropriate oversight of the risks facing SSC and the system.

An externally chaired Risk and Audit Committee whose role is to challenge and provide assurance to SSC that risk management practices, particularly at the strategic level, are appropriate. The framework ensures risks to achieving our outcomes or delivering our outputs are mitigated appropriately.

Regular management reporting to provide an assessment of progress against stated performance expectations. This reporting provides an opportunity for the Senior Leadership Team to have discussions on whether there are any operational risks or issues that need to be managed.

Strategic Risks

SSC refreshed its strategic risks during development of the 2013 Statement of Intent. SSC strategic risks have a focus on performance of the system as a whole. More work has recently been done to clarify the frameworks around each one of these risks to ensure the threats can be adequately monitored and appropriately managed. The table below outlines each one of the strategic risks and the key mitigations to ensuring the risks are not realised.

Footnotes:

1: A full description of each output and what is delivered by SSC is outlined in the operating intentions of the Statement of Intent.

3: The unadjusted LCI includes the cost of performance-based, as well as general wage movement. The LCI measures changes in salary and wage rates that employers pay to have the same job done to the same standard. Rises to match the market, retain staff, or reflect the cost of living are shown in the LCI, while rises reflecting individual performance or years of service are filtered out. The LCI analytical unadjusted series fixes the amount of work, but reflects quality changes within the occupations (such as individual performance or years of service) in addition to price change.